Banks in Iowa and nationwide will soon be getting out of the student loan business. President Obama is signing another piece of the health care reform bill today which includes legislation making the U.S. government the primary lender to college students and stripping banks of that ability.
Iowa Senator Chuck Grassley opposes the idea, which he says essentially will “tax” college students while eliminating thousands of jobs. “There’s 31,000 people dealing with government-guaranteed student loans in banks around the United States and I see most of those people unemployed,” Grassley says. “I think that that’s wrong.”
Grassley, a Republican, says students have already been voting with their feet for years, by walking into their local banks for college loans. He says the people have already spoken, and the new law will reverse their wishes and their best interests. “I don’t see how the students of this country are going to get the same service out of four call centers as they get from their individual banks,” Grassley says. “I think the evidence and accuracy of my statement comes from the fact that over the last couple decades, people have had choice between government loans and through their local bank.”
The latest health care bill includes an education package, which is considered the largest rewrite of federal college assistance programs in 40 years. About half of all of the nation’s undergrads get federal student aid. Grassley says college students who borrow money directly from Uncle Sam will be forced to pay more for their educations than if they were allowed to shop around for the best loan deal. He says Congress will be making college students pay more for their tuition in order to fund other government programs, essentially, taxing the students.
“Right now, the way this is being handled, a student with $25,000 loan debt at the end of four years is going to be paying in the neighborhood of $1500 to $2000 more in interest to be used someplace else,” Grassley says. “They end up taxing college students to do a lot of other things.” He says some of those “other things” are education-related, but many others aren’t, including health care. Supporters say the new policies will help students by eliminating the middle-man fees banks charge while pumping more money into the Pell Grant program.